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Transcript: Community Broadband Bits Episode 313

This is the transcript for episode 313 of the Community Broadband Bits podcast. Terry Huval of LUS Fiber reflects on the process of creating a community network. Listen to this episode here.

Terry Huval: There never was a level playing field in Louisiana and it still is not. Our competitors have far more resources and play much harder ball politics than anything we could, we could do on our own. We're fortunate we have a community that was brave enough to support our vision to put this system in place.

Lisa Gonzalez: This is episode 313 of the Community Broadband Bits podcast from the Institute for Local Self Reliance. I'm Lisa Gonzalez. The folks in Lafayette, Louisiana dealt with challenge and adversity as they develop their fiber to the home network LUS Fiber. In addition to warding off both legal and strategic attacks from the big incumbent ISPs, community leaders have had to be mindful of strict state rules that impose added restrictions on their operations. This week, Christopher talks with one of the people instrumental in bringing high quality Internet access to the people of Lafayette. Terry Huval. Terry is retiring soon, and we wanted to hear some of his reflections on what went well, what were some of the community's toughest challenges, and how they've met and exceeded the goals they set. using the fiber network as a critical development tool. There is much to the story of Lafayette, including our 2012 report Broadband at the Speed of Light. For more, check out muninetworks.org. Now, here's Christopher with Terry Huval from Lafayette Utility System.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self Reliance, back in my office in Minneapolis. But today I'm speaking with Terry Huval, the director of Lafayette Utility System in Lafayette, Louisiana. Welcome back to the show.

Terry Huval: Bonjour!

Christopher Mitchell: How are things down there, deep in Cajun country?

Terry Huval: Oh, it's nice and steamy and hot and beautiful.

Christopher Mitchell: Just the way you like it, I am sure.

Terry Huval: Absolutely.

Christopher Mitchell: Terry, you've been on before and, and you've, you've been there from the beginning and in fact you were probably the first one to suggest the idea to the mayor, to Mayor Durel at the time. Um, we've, we've covered the backstory of the Lafayette Utility System. Um, but I think there's a couple of points I'd just like to make for people who aren't as familiar. And one is that I think that you are one of the most successful citywide municipal fiber networks. Um, and I say that not just because of you've, you've broken even, you know, you've never had to use a dime of taxpayer dollars, as was your intention. You've created tons of jobs, changed the culture and beneficial ways. I mean, but you did it in the face of more adversity than almost any other network. And so I just wanted to, to sort of lay that out there as a, as a background of what we're talking about in Lafayette. And, and let me just ask you, is that about right in your mind?

Terry Huval: Yeah. Yeah. I think you're right. I don't know, I mean, I'm not sure how much trouble anybody else had in the country and I've monitored some of that, but I do know that we've had more than our share of struggles having to, uh, move forward with at least announcing the project as well as getting it constructed. Uh, our adversaries were very, very strong and pushed really hard and cost us a lot of money and a lot of time. But we made it through it.

Christopher Mitchell: I think it is worth noting, because as I'm sure you know, and as people who listen to know, we were supportive of cities that decide to use taxpayer dollars. But for you it's been a point that you would never use taxpayer dollars and you have not. Is that right?

Terry Huval: That is correct. From the beginning, uh, we, we never did. And the only money that we used to build a system was money that we either borrowed or earned.

Christopher Mitchell: The question that I, that I really want to start off with, sometimes I end with this, but I, I, with you, um, you've announced that you're going to be retiring before too long. Um, and so I think it's really a great time to reflect and ask you, knowing now, I mean, when you get started with this, you are trying to build a utility system that would just meet local needs. You ended up going through lawsuits and multiple battles at the state capital, um, endless freedom of information request used as a weapon against you. Um, reports that even when you were succeeding, claimed that you were failing. Um, you've had the incumbent industries try to harm you in other areas of your utility that aren't even related to broadband. So knowing you, I know that you'll say it was worth it, but, but can you tell me why it was worth it for the amount of sleep that you've lost?

Terry Huval: Hah, well, most definitely our community has benefited from making this happen. Uh, I, in all fairness, I think if someone would've said, okay, Lafayette and Terry, if you, if you decided to take this path, here's what you're going to have to go through, I think be a much more tepid reaction to that locally. I mean, while people might have been excited about it, the idea that we were going to go through all of that challenge at all that cost and all of that risk, uh, would have been, I think it would have cooled some heels, but you, that's not even what happened. What happened is that each event that we had to deal with, each situation that popped up, it was just like one more step we had to go through. So the fact that we've taken it one step at a time made it palatable, uh, and uh, it taught us a lot and actually our competitors kind of did us a favor because it created more attention for what we wanted to do than we could've ever possibly have put out there on our own. Uh, and so in some cases I think ought to send them a thank you for making so much noise about it that, uh, that our early advertising didn't have to say more than, "we're ready to serve you."

Christopher Mitchell: Well and one of the things that you noted when you finally were allowed to start building the network was that your capital cost to build a network declined significantly because of the amount of years that you lost fighting in courts for just the authority to do it.

Terry Huval: Yeah. And not only that, we also ended up getting the benefit of the next generation of infrastructure that was available. Our system was one of the first ones to be put in that would have had the ability to go from not only the hard megabit per second speeds but to Gig. And with minor modifications to 10 gig, which we're offering that now too. So, you know, it actually put, gave us the opportunity to, to build it, use a more advanced typology that allows us to continue to grow our system at a much faster rate than we could have with the previous technology. So we want to thank our competitors for giving us that opportunity.

Christopher Mitchell: The heritage of the cajuns is strong. Um, you know, it's worth noting that every generation thinks the generation after it is weaker and softer, but, but much like your, your ancestors who settled the region that probably should not have been settled given the weather you face on a daily basis, um, you know, you're, you're always up for a challenge, it seems like. Um, let's talk a little bit about what you've experienced and how you got through it because as I noted, you faced a lot of competition and, and I think if you go back to what Mayor Durel's talking points back when the referendum to, to move forward with this project. You know, his critique was often one that the private sector would not do this, that there was not real competition in investment that you needed, and I fully agree that he was right. And yet, over the years, you know, I, I think you would say that you have faced stiff competition. So how do we understand that in that we both are frustrated, a lack of competition. And yet when you get into this, it feels very competitive.

Terry Huval: Oh, there's no doubt that what happens is that the private sector has done a really good job of scaring communities, uh, and, and uh, to keep them from doing this and they've done such a good job with that that there's only a few communities, or a handful that may try to do so. And so when that happens, then those large companies use all their resources and just pour it on those, on those poor communities that are trying to make, make that take place. And that's what we went through here, you know, back when we saw, not long after we got it, got really deep into the construction of it, is that our competitors were lowering their prices in Lafayette, but not lowering their prices in the other communities that were outside of Lafayette, like Baton Rouge was paying more for a cable TV service, uh, and Internet and the people in Lafayette where, whereas prior to that time that they were paying the same. So competition worked very granually, uh, and, and our, and, and in this era. And so that was tough, because that meant we had to keep our prices lower than maybe our price points could have otherwise had been, which made our profitability more difficult, made it more, take more time for us to get to that point. So they certainly did everything they could from a pricing and marketing perspective as well as just from when we were constructing the system, you know, trying to find ways to get in our way. And, uh, as you pointed out, our, our, our culture here is fairly resilient and fairly hardheaded. And, uh, and we kept plowing through and finding ways to get done what needed to be done.

Christopher Mitchell: In eight years or so, I think you've had to raise or I would say adjust your prices. You raise your prices while offering higher capacity connections one time that I'm aware of while always maintaining that low cost affordable option that people can take without signing on to other services. What do you do in this environment? Or I guess there's several different questions around pricing, but the first one I'm curious about is how do you maintain such low pricing or consistent pricing in the face of, of, um, you know, different promotional deals that are rolling through and other challenges.

Terry Huval: You know, we have learned how to play that game. Uh, you know, it, it initially I gotta tell you, being a utility guy, you know, the rates to Customer A are the same rates I charge a Customer B, the same rates I charge Customer C. And I realized not long into this business that I want to go to be able to, we weren't going to be successful had we'd done that because there are always people out there that are looking for deals and if you don't have some kind of package you can put out there, even though it might be two years or whatever, if you don't do that sort of thing, you're going to lose an important segment of the population you tried to serve. So we've had to kind of go with the approaches that attract customers and retain customers. That was a, that was a learning curve for us. And also we had to learn that, you know, you're not gonna make it in this business if you don't increase your rates to cover what your costs are and our big cost increases through the years have been cable television. And while cable television is kind of dropping in popularity, that's still a very important segment of our customer base that wants that service. And if we're going to offer it, we're going to have to increase the prices. And on the Internet side, people want, you know, good high speed Internet and using more and more of it. We had to make adjustments there to keep our rates to where it was. We had to increase them, but we always kept it at a level that was cheaper than our competitors. And uh, and we shaved it really tight. Uh, but it's worked out well for us.

Christopher Mitchell: Right. It's a good reminder. I'm sure that your, your television prices have gone up more than more than once, just because that's the nature of the business. Um, so I guess I missed a few times, but you did adjust your rates a couple of times where you increase the speeds that were available and bumped up the, uh, the prices on the Internet as, as we all know that the television prices escalate much more rapidly.

Terry Huval: What we tried to do with the Internet is every time we increased the rates, but Internet would give the customers more speed. So they got something in exchange for the increases, and the increases were never very large increase it might be like a couple of bucks I mean, uh, you know, each year. But it's, you know, what happens in the business is that you as see the shift taking place of more and more people cut the cord, you know, that's, that's good that they're buying our Internet services, but if we don't adjust our rates so that we're not so dependent upon the cable TV service especially, then we're going to find ourselves in a financial position that will not be attainable in the longterm. So there has to be some really careful monitoring of what's what's happening with your customer base, how people are responding to it and recognizing that if we can increase speeds and, and increase prices just a little bit, that customers will see that as a big plus for them because they're looking more and more for, for, for faster speeds not necessarily just to play games and so forth. But just for the fact that they're utilizing the Internet in their homes for more things than just streaming.

Christopher Mitchell: Terry, you mentioned the utility mindset that you came into to start this with and I think this is one of the things that often we identify as, as a real challenge for cities that have successful, and not just successful, but I mean very well run municipal electric utilities, figuring out in particular how to deal with advertising. So can you walk us through what you experienced on that end?

Terry Huval: Yeah. On the advertising side, we contract with, with a couple of different advertising firms and Lafayette, went through the process with them as to, you know, what were our strong suits, what were the messages we wanted to get out there, how do we portray ourselves to the public, then deciding what mediums we would use. And, and that's fairly broad. I mean, you know, certain things like billboards, television, you know, all the things that you can have with the, uh, the, the, the various media is out there that can allow you to get seen on the, on the, to the public. But the other thing that we thought was important too is to sponsor major events in our community that our well respected. Lafayette has a culture, just cajuns zydeco music culture. So it's a, it's that there are events that take place here, a couple of pretty big festivals here, Festival International and Festival Acadiens, and we've become the sponsors, the prime sponsors of both of those events. And our logic there was that we felt that our customers or the people of Lafayette who are proud of their heritage and proud to have these kind of events in town would be more enamored with us, would be more likely to if they had to make a choice to buy our services because we're supporting what they think is important, you know? And that's pretty fun, to meddle in all kinds of advertising. But especially from a local perspective, we're able to say some things and do some things that our competitors can't possibly say because they serve other territories. You know, we had that uniqueness that we could work in our favor. The focus was always on keep it local, you know, make it, make it clear that one of the unique things that we have going for us is that we are, we are your system, you own the system and it's providing good things for the community as a whole.

Christopher Mitchell: And you sponsor the Wi-Fi at the airport. I'm curious what kind of, is that a headache? I mean, is that something that is relatively easy to do? Um, I'm sure it gets you a lot of visibility, but I've, I've always been curious what it takes to do something like that at the airport.

Terry Huval: No, it wasn't that complicated. We just, um, we sat, we talked to the folks at airport and said, well, do we had some, some supporters amongst the board of airport to begin with so that always helps. And we set up the system, put a Gig in the airport and so, and people love it. It's free and it's kind of a, we have billboards in the airport that to advertise that. And so it's another one of those things that we think is a good thing, not only for our local customers but also for people that are traveling to see something to something really unique here in Lafayette because a, a fairly small airport that's got gig and you don't see that happening in too many airports in the country.

Christopher Mitchell: Right. Although you do get quite a lot of traffic for some of your, your various festivals through, I'm sure.

Terry Huval: Oh yes.

Christopher Mitchell: So is that, are those your employees then that go and tinker with an access point when it goes down or is that something that the airport takes care of?

Terry Huval: No, in this particular case it's a sponsorship that we have. So it's as though we're paying the airport to do something. In essence we are paying them and then they kind of paying us back, but this ain't lot of dollars for us to put up the system at our cost and operate the system. Uh, so it, it, it works well for what they're trying to get done. And from our standpoint, we ensure that the system is working properly going forward.

Christopher Mitchell: So one of the things that we've been excited to see here was that after a long period of making this network work very well in Lafayette city, that you'll be expanding, and my geography is a little bit limited down there, but I'm guessing you're expanding to other communities that are within the parish that are just very close by.

Terry Huval: That is correct. Yes. So we, we had been getting requests from people outside the city of Lafayette, for some time to get service to them, but uh, after all, this system was voted on by the citizens of the City of Lafayette and we had an obligation to serve them first. And so after we laid out all the fiber to the locations that were initially planning to be served, then we had an opportunity to start looking at serving outside the city. The state law that's in effect that has given us so much challenges in the past does not restrict us from serving, restricts us from serving outside the city. Allows us to serve really anywhere we want to in the state. Uh, we're not looking at going all over the state, but I mean certainly there's a limitation. So we, uh, there's a couple of communities that have a good high growth rates, a little town of Broussard and Youngsville, which is just south of Lafayette, and our infrastructure was not very far from those communities. They're very close to the city of Lafayette. But we've got with the, with the Mayor Robideaux, who's the mayor now, and I discussed it with him and told him, look, here's what I think we should do. We're get requests for this, it's a good way for us to make some, some money, uh, and it'll, it'll help our profitability. But, uh, you know, he and I both agree who weren't going to do this on a speculative basis. We're going to do it based on, you know, on having some pretty good, good sense that we're going to have success. And these first developers that we served had been just that. We've had some wonderful success out of it. People are very excited about it. It's been interesting to see that that long after we began putting fiber in those developments, some of our larger competitors start putting fiber in that area. In fact, the larger competitor there is a guy that fought us all this time and it is just been in the last couple of years, we've seen them starting to put fiber but only in places where they think they can make the highest profitability, uh, but the good users that were there first and so many locations. So we've, we've already got, you know, a good bit of that market on, with people that are very satisfied with our service.

Christopher Mitchell: That actually reminds me that I was curious, what is your take rate within the city of Lafayette now?

Terry Huval: Yeah, it's about 43 percent. We knew if got above 38 percent, we'd be where we needed to be at our, according to our business plan and that we were right there with it.

Christopher Mitchell: So 43 percent gives you enough net income at the end of the year to, to invest that in some nearby communities. And you know, for people who might not be familiar, I'm guessing you probably already run the electricity to those houses, you probably maybe do the water as well. Is that, is that right?

Terry Huval: In the city of Lafayette, yes. We provide electric water and sewer service.

Christopher Mitchell: You don't in the parish.

Terry Huval: Yeah. The parish, we have some areas that were serve, very few. There's other utility companies in those areas that provide service there.

Christopher Mitchell: Okay. But the one thing that I'm, unless something's changed, I know that you do do is you generate electricity and you generate more electricity than you use and you export that to, you have agreements with others that buy that as well. Right?

Terry Huval: Yes. We have done that. A lot of the whole electric market has changed. So we're actually taking advantage of lower cost power that we can use in Lafayette from outside. So it's a, it's a buy and sell sort of thing, it's a market-driven type approach to energy in this area now just like it is in many parts of the United States, so that that model has changed a good bit, but our customers are still getting really good, low cost electric service, too.

Christopher Mitchell: Great. I just wanted to sort of throw some of those things. Apparently I had a few misconceptions myself, but, but for a municipal utility, it's not always the case that these things naturally stop at the border's edge. Um, there's a lot of cases in which utilities help each other out. They, they cross over a little ways. So for you to expand Internet access is not something that's outside the norm. I don't think

Terry Huval: No, it's not outside the norm. It's just that when you look at what's happening in some other states like in Tennessee where there's restrictions on where they can extend their system, you know, we're, we're fortunate that our law does not provide that type of a limitation.

Christopher Mitchell: Now, one of the things that I'm, I'm definitely curious about ism there was this idea of a, of a level playing field in Louisiana. Um, do you feel like you're, you have the same advantages and vulnerabilities as your cable and telephone competitors?

Terry Huval: There never was a level playing field in Louisiana and there still is not.

Christopher Mitchell: [laugh]

Terry Huval: Our competitors have far more resources and you know, play much harder ball politics than anything we could, we could do on our own. We're fortunate. We have a community that was brave enough to support our vision to put this system in place, but it's been a struggle. Uh, the, the private companies have just so many advantages over what we have. You know, um, you know, for example, we have to, you know, we go through an audit every year to make sure that we're not selling our services too cheap to local government. Sounds Weird, right? If they want to be sure that we're charging local government the same price that we're charging folks on the outside, you know, it sounds silly because we should be able to put aside that Lafayette government is a large enough entity to where we can sell in bulk or whatever. We ought to be able to charge you a price, but we can't do it. So their purpose in this Fair Competition Act or allegedly Fair Competition Act make it more difficult and more cumbersome for us to be successful and they actually increased cost to our communities that it could say, well, look at that. Their costs are going up because of fiber. So is that that kind of game that gets played and uh, it's unfortunate, but you know, they, these guys have deep pockets and they play the politics very well and they do it 365 days a year in areas that we don't start dealing with people who don't always know.

Christopher Mitchell: Well, the reason I wanted to ask you that right after the expansion is because it's worth remembering that those things have real world consequences. One of them I'm guessing is that, uh, you know, you as a, as a utility would have liked to have expanded this system more rapidly and probably further than you may be able to because you're constantly worrying about these unfair, um, and certainly uneven regulations. Um, and so there's people outside of Lafayette who would have much better Internet access, have a choice in providers that don't have it today because of those rules.

Terry Huval: Oh, that's true. In fact, extending outside the city has created some stir that's caused us to have to go back to the Public Service Commission to go through an audit, that's all happened again. And you know, but we're confident we're going to do fine with it. But it's the sort of things that those companies can do that, you know, they don't, they don't get a, you know, uh, they don't get something served to them in that same way. It's just, it's just the way that they play that game. And so we always, we're always looking over our shoulder. Every time we decide to do something bold, we say, okay, what's going to happen? You know, what, what's the pushback we're going to get? and uh, and, you know, make a decision based on that and try to get it as much, uh, in the, in the right sweet spot as we can.

Christopher Mitchell: When the referendum happened 13 years ago, you know, one of the major campaign slogans and organizing rallying points was, was about the children, making sure that the children that were growing up in Lafayette could stay in Lafayette or if they wanted to leave for university, and then be able to come back and get great jobs in Lafayette. Many of those kids are of that age now where I guess they're making those decisions. So is that happening? Is that, has that been successful?

Terry Huval: Yeah, we're seeing a lot of that. There's so many reasons why a person might stay here or not stay here, but there are, there are jobs in Lafayette, there are economic development opportunities that's come up through two years of companies building operations here that are able to hire these people, uh, and uh, you know, I, I think, uh, I, I think certainly it has been a component that's helped Lafayette continue to grow. Because from the beginning of this project to now, each year Lafayette has grown, it never has gotten less. And from each year, from the beginning of this project to now, we have grown, we have continued to increase our overall net revenues, our overall gross revenues. You know, we're, we're getting close to $40 million of gross revenues now and clearing about $8 million after we pay all of our cost of, uh, of, of operations. So that's what gives us the position now to have the cash necessary to begin serving other areas. So it's a huge success in that regard. Now you're still gonna have those people out there that's going to say, well, yeah but look at your income statements and your and your depreciation and, there's no doubt that we were under water because of depreciation for a while. Uh, but, but we have gotten above that, uh, we're, we're, we're a positive net income, uh, in the tune of, you know, $3 or $4 million a year and that's going to continue to grow as time goes on. So we're well on our way as a system that served its first customer really nine years ago, nine and a half years ago. Uh, you know, we've gone, we've come a long way from those, those early days.

Christopher Mitchell: Is there anything that, uh, anything else you want to tell us before you, before you leave? I mean, you're always going to be welcome to come back, but I don't know if I'll be able to track you down after you stepped down as the director.

Terry Huval: Well, you've got my cell number so you could always find me, but no, I have really enjoyed my work here. Uh, it'll be 24 years when I retire. I worked 16 years before that with an electric utility company. So I've had 40 years in that business and the last, I guess 14 years since we've talked, began talking about fiber the first time, you know, it's been an invigorating challenge for me and my team and for our community and it's created a lot of excitement, a lot of public support. Uh, and uh, we, uh, we look forward to continuing to grow this system. And I, the good news is that I have some really fine people that I've worked with here, some very bright young minds and they've been sitting at the table with me all the way through this process so they know what to do, they know how to get there. And I still live in town, so, you know, no matter what we're going to, there'll always be a connection there and it's a proud part of our history.

Christopher Mitchell: Well, wonderful. Thank you, Terry for letting us know what's going on, and also being an inspiration for people to know that, uh, this can be done even in the face of overwhelming opposition.

Terry Huval: Well, thank you Chris and look, thank you to you and so many others that have been so supportive of us and especially in those days where we were struggling, you know, y'all voices, uh, gave us, gave us hope because we, sometimes people will try to attack you, try and attack us and say that you, you know, you guys don't know what you're doing or this can't be done. And when you talk to others and especially folks like you who see the see the vision of it all, it, it gave us a lot of, a lot of inspiration to go forward with this. So thank you so much.

Lisa Gonzalez: That was Christopher speaking with Terry Huval Lafayette Utility System Discussing LUS Fiber. Remember to read up on LUS Fiber and the struggle in Lafayette at MuniNetworks.org. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at podcasts@muninetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @communitynets. Follow muninetworks.org stories on Twitter. The handle is @muninetworks. Subscribe to this podcast and the other ILSR podcasts, Building Local Power and the Local Energy Rules podcast. Never miss out on our original research. Subscribe to our monthly newsletter at ILSR.org. We want to thank Arne Huseby for the song warm duck shuffle, licensed through Creative Commons, and thank you for listening to episode 313 of the Community Broadband Bits podcast.

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In Orwellian fashion, many of the examples offered as disasters are actually tremendous success stories. Many of the figures used as contemporary evidence against municipal broadband are based on case studies of cable television systems from a report that is seven years old. Even if it were still timely, its conclusions have been thoroughly debunked.